Deposit Insurance System in Palestine

The provision of efficient and sound mechanisms to protect depositor’s funds, protect safeguard banks from faltering, and maintain the financial stability of the banking system are essential, given the critical role banks play in impacting the macro-economy. Therefore, bank’s capacity to operate efficiently within an economy depends on the extent to which they meet their financial obligations, and thus earn depositors’ confidence and increased placement.

The failure of a bank and its inability to meet the claims of depositors may threaten financial stability and become ominous of an acute financial crisis within the banking system leading to a decline in public confidence in the performance of the entire banking system. To avoid such a crisis, state authorities establish a “deposit insurance system” to serve as a major component of an effective financial safety net to counter future crises facing the banks. The need for such a system increases with the rising transition towards the open-door economy model, and the globalisation of banking as banks started to accept deposits and offer services across borders. As a result, a financial crisis could become contagious and spread from one country to the other.

A “deposit insurance system” is a mechanism established by governments through laws and regulations and intended to protect depositors these (particularly with small accounts) against the loss of their deposits in case of a bank failure, thereby safeguarding the financial stability of the banking system as a whole and promoting savings and economic growth.

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Q & A

Which banks are member institutions of PDIC?

All commercial and Islamic banks operating in Palestine and licensed by Palestine Monetary Authority (PMA) Membership is compulsory for all banks licensed by the PMA

Does PDIC insure deposits in all currencies?

.PDIC insures deposits in all currencies with coverage limit up to $20,000 or equivalent in other currencies per depositor per member bank

What types of deposits are insured by PDIC?

PDIC insures all types of deposits for individuals, institutions, residents and non-residents, including:

-Current and demand deposits

-Saving deposits.

-Term and subject to notice deposits.

-Joint deposits accounts that belong to more than one person.

Excluding the following deposits:

-Deposits of the government and its agencies.

-Deposits of the PMA

-Deposits between members and other financial institutions

-Cash guarantees within the limits of the amount of guaranteed facilities

-Deposits of related person, in accordance with the provisions of the banking law currently in force.

-Deposits of the auditor of member and/or members of its Sharia supervisory board

-Restricted investment deposits, as determined by the board

Other financial institutions :

-Deposits of insurance companies and reinsurance companies licensed by Palestine Capital Market Authority.

-Deposits of brokerage firms licensed by the Palestine Capital Market Authority.

-Deposits of Specialized lending institution licensed by the PMA.

What is coverage limit of PDIC?

The coverage limit is up to $20,000 (Twenty thousand US dollar) or equivalent in other currencies per depositor per member bank.